Checklist
Before investing in any IPO, run through this comprehensive checklist. It helps ensure you've covered all important aspects.
A good checklist prevents emotional decisions. Use it for every IPO you consider, regardless of how "hot" it seems.
Business Quality Checklist
| Question | ✓/✗ |
|---|---|
| Are margins stable or improving? |
Financial Health Checklist
| Question | ✓/✗ |
|---|---|
| Are return ratios (ROE, ROCE) satisfactory? |
Management Checklist
| Question | ✓/✗ |
|---|---|
| Are related party transactions reasonable? |
If you can't answer "yes" to most management questions, be very cautious regardless of other factors.
Valuation Checklist
| Question | ✓/✗ |
|---|---|
| Would I buy this at 20% higher than issue price? |
RHP Review Checklist
| Question | ✓/✗ |
|---|---|
| Are there any litigation concerns? |
Red Flag Checklist
If any of these are "yes," proceed with extreme caution:
| Red Flag | ✓/✗ |
|---|---|
| Legal issues involving promoters? |
Even one serious red flag should make you reconsider. Multiple red flags = avoid.
Market Conditions Checklist
| Question | ✓/✗ |
|---|---|
| Is this part of an IPO "frenzy"? | |
| Am I making this decision rationally? |
Personal Criteria Checklist
| Question | ✓/✗ |
|---|---|
| Can I hold this for 2-3 years if listing is weak? | |
| Am I applying for listing gains or long-term? | |
| Is the amount I'm investing appropriate? | |
| Have I done my own research (not just tips)? |
Decision Matrix
Score each area out of 10:
| Area | Your Score (1-10) |
|---|---|
| Industry |
Scoring Guide:
- 40+ : Strong candidate
- 30-40 : Moderate, proceed carefully
- Under 30 : Consider skipping
Final Questions
Before you apply:
-
Would I buy this at 20% above issue price?
- If no, listing gains are your only hope
-
Would I hold this if it lists at discount?
- If no, reconsider your conviction
-
Have I relied on my own research?
- If just following tips, step back
Fear of missing out (FOMO) drives poor IPO decisions. If you're rushing because "everyone is applying," that's a warning sign.
Key Takeaways
- Use this checklist for every IPO, without exception
- Score each area systematically
- Red flags should trigger deep investigation
- Be honest about your reasons for investing
- When in doubt, it's okay to skip
Module complete! Next, let's learn about the practical aspects of applying and trading IPOs.
Sources & Disclaimer
- SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018
- SEBI Guidelines for Red Herring Prospectus (RHP) Format
Note: Any benchmarks (e.g., "Good ROE is > 20%", or specific P/E ranges) are simplified industry heuristics for educational purposes. True evaluation depends on specific industry context, market cycles, and individual company circumstances.